UPDATE 3-Venezuela shakes up windfall oil tax

Mon Jan 28, 2013 7:45pm EST

* PDVSA to channel more dollars to central bank

* Move could delay need for another devaluation

* Controversial Fonden fund to receive $3bln less

By Marianna Parraga

CARACAS, Jan 28 (Reuters) - Venezuela unveiled changes to its windfall oil tax system on Monday that will channel more dollars to the central bank to address a lack of hard currency and could delay the need for a devaluation.

With President Hugo Chavez recovering after his latest cancer surgery in Cuba, Vice President Nicolas Maduro said late on Saturday that the socialist leader had taken a series of important economic decisions to strengthen exports.

Maduro's comments stoked speculation that in Chavez's absence his socialist government might be preparing to announce a devaluation of the local bolivar currency - which the private sector argues is long overdue - or other measures.

The changes to the complex windfall tax system will boost state oil firm PDVSA's contributions to the central bank by $3 billion, Energy Minister Rafael Ramirez said, as well as add $1.4 billion to the often cash-strapped company's books.

"By selling those dollars to the central bank, we are going to have more resources and be able to cover our commitments," he told reporters. "There is enough foreign currency to sustain the national economy."

Under the changes, Ramirez added, PDVSA would reduce its contributions to Fonden, a controversial off-budget state investment fund, by almost $3 billion this year if oil prices remained stable. He said more money would go into the national budget and regional allocations.

Fonden, which has in the past accounted for half of public investment, received more than $15 billion from PDVSA last year. Critics say it is secretive and has funneled tens of billions of dollars projects with little or no oversight from lawmakers.

'TWEAKING AT THE MARGIN'

Eurasia Group said the moves suggested officials were worried about the political costs of shortages of goods and rising inflation, but were unwilling or unable to make any major economic reforms, including a significant devaluation, due to the political uncertainty created by the president's absence.

"Beyond supplying more liquidity (to the state's forex system), the measures imply that the government has no political incentives to make any material economic adjustments and instead will maintain the current system, potentially tweaking policy at the margin," it said in a research note.

Ramirez showed the signature of Chavez on the proposed legislation, which still needs parliamentary approval.

"Tomorrow we are going to send the bill to the National Assembly. We must comply with procedure," the minister said.

Changing a previous sliding scale, PDVSA and its foreign partners will have to pay the state 20 percent of income from sales of oil between $55-$80 per barrel, 80 percent between $80-100, 90 percent between $100-110, and 95 percent over $110.

Chavez first introduced a windfall tax in 2008 of up to 60 percent on revenues from oil prices over $100 per barrel, based on the ideas of Nobel Prize-winning economist Joseph Stiglitz.

In 2011, the taxes were ratcheted up to a maximum of 95 percent for oil over $100, bringing in timely extra revenue before last year's presidential election which Chavez won.

Venezuela's oil sector has been the financial motor of Chavez's socialist reforms, contributing funds to a wide array of education, health, housing, sports and other programs.

Venezuelan business leaders have complained about growing economic imbalances that they say are caused by insecurity, uncertainty amid Chavez's prolonged absence, and bad policies.

A devaluation would make exports more competitive by lowering local production costs and spur domestic industries by making imports less competitive with locally-produced goods.

It would also improve state finances by providing more bolivars per dollar of oil exports. But it would also push up consumer prices in a country that already has one of the highest inflation rates in the region.